If I were to do number 2, will this have an effect on the performance. Also to note I would then have 3 points of failure.

Update 09/03/2012

Key Updates:

I had spoken with the ISP (Movistar) and they have told me that I do not need the information regarding VLANs in the configuration, however I tested this theory by removing the VLAN setting (OEM Movistar Router) and leaving it blank. The internet did not work, therefor the VLAN information is very important!

The Movistar router does not support bridge mode :(

Today I went out an bought 3 Ethernet routers. (Cisco (E4200-EZ), ovislink (EVOw300AR) and sitecom 150N). Tried to setup PPPOE, none of them worked, there was no setting for VLAN that I could see

I'm willing to bet a call to your ISP would solve this the fastest.
–
SafadoMar 7 '12 at 22:54

@Safado - You would think so, however this has been tried. I had to explain to them that I wanted the username and password to the router they provided me, that in its self took about 30 minutes, they were asking me why etc... I am going to try again this weekend of course, but in the mean time, and help is welcomed...
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ArthorMar 7 '12 at 23:11

2

Ask the ISP if the Irouter can be put in bridged mode. This will allow it to pass traffic straight through to the TZ200. Also, does the TZ200 have the latest firmware?
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Jim G.Mar 7 '12 at 23:33

@JimG - Hi Jim, I have access to the routers admin panel and I cannot find anything about bridge mode in the settings. The TZ200 has the latest firmware. I did it last time.
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ArthorMar 8 '12 at 11:31

I second Jim's suggestion. At one of my remote sites this is what we do. The modem from the ISP is put into bridged mode, our TZ150 plugs into it and we establish the PPPoE connection from the SonicWall. However, given that they've provided you with two devices, their set up might be different.
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SafadoMar 8 '12 at 14:14

This is actually not uncommon, a lot of FTTH services in the Netherlands require you to set up PPPoE on VLAN 6 as well. Just create a VLAN interface on port X1 (it will be called X1.6) and configure your PPPoE on that. Make sure the routes send traffic from X0 to X1.6 instead of X1 and you're fine. No need to put switches in between.